1) MARCH/APRIL 2016
Dealer
Insights
Handling
vehicle recalls
Or how to win friends
and influence customers
5 tips for boosting sales
employee retention
Lift your profitability
to new heights with
smart management
Could you use
life insurance
more creatively?

2) Handling vehicle recalls
Or how to win friends and influence customers
he number of vehicle recalls in
the U.S. has gone sky-high in the
last couple of years, setting a new
record of nearly 64 million safety recalls in
2014, according to the National Highway
Safety Administration. The Detroit News
reported that General Motors alone issued
71 separate recalls in 2014, covering nearly
30 million vehicles worldwide.
T
A double-edged sword
Recalls can be a double-edged sword for
dealerships. On the negative side, they can
bring an avalanche of work crashing down
on your service department in a relatively
short period of time. This can disrupt normal service department operations, put a strain on your
service employees, and make it difficult to meet
the service needs of your regular customers.
A recall offers you the
chance to impress potential
customers by providing
outstanding service.
On the positive side, recalls can present a tremendous opportunity to attract new customers who
aren&rsquo;t currently having their vehicles serviced at
your dealership. They also can bring fresh faces
into your showroom, which then become potential
prospects for buying new vehicles.
According to the National Automobile Dealers
Association (NADA), most car owners visiting a
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dealership for a recall typically don&rsquo;t have their
vehicles serviced there. So a recall offers you
the chance to impress potential customers by
providing outstanding service. A well-managed
recall can also boost your service department&rsquo;s
reputation and revenue.
Handling recall customers with care
Managing the recall process well is the key. Most
car owners aren&rsquo;t thrilled to have to bring their
vehicles into the dealership for unplanned work.
After all, it&rsquo;s an inconvenience for them, and they
don&rsquo;t get any benefit other than knowing that the
safety problem with their vehicle has been fixed.
One solution to this potential negative is appointing a dealership employee whose main job is to
greet recall customers and make them feel welcome. This employee could explain how the recall
workflow process works, answer questions, and
point customers to where they should go to get
the process started. He or she should have strong
customer service skills and be able to soothe and
reassure those who might be angry.

3) Dealing with upset customers is just one part of
the challenge involved in handling recalls. The
other is managing the additional volume of work
that will come into your service department. NADA
recommends creating a special recall team. It
should consist of:
â± top-notch service advisor responsible for
A
managing the recall workflow through the
service department, and
â±
Several technicians who specialize in the
particular kind of repair dictated by the recall.
Yet another challenge is providing a high level of
service to your regular customers while meeting
the needs of your recall customers. Doing so
might require hiring additional service technicians
on a part-time or temporary basis, or transferring
technicians over from another location if you own
multiple stores. Also consider extending your
service department hours during the recall period,
and possibly even opening your service department an extra day during the week.
Recalls as a profit center
Recalls can bring in additional revenue for dealerships that are able to streamline their service
department&rsquo;s workflow and maximize efficiency in
the completion of the work. &ldquo;If your service technicians can complete the recall repairs in less time
than what has been budgeted for the repair by the
manufacturer, the recall work becomes a profit center for the dealership,&rdquo; said a NADA spokesman.
walk-ins. Doing so will make it easier for you to
deal with the unpredictability of recall work and
maintain a higher degree of customer satisfaction.
From lemons to lemonade
From your dealership&rsquo;s perspective, recalls aren&rsquo;t
necessarily a bad thing. You can turn this potential
lemon into lemonade by having a plan in place
to truly manage recalls &mdash; instead of letting them
manage you. A successful effort can help you
maximize potential income, minimize car owner
inconvenience and possibly gain new customers. â°
Vehicle recalls impact CSI scores
According to market researchers J.D. Power
and Associates, handling recall work efficiently
and in a customer-friendly way can pay off for
dealerships in the form of higher customer
service satisfaction scores.
J.D. Power&rsquo;s overall customer service index
among customers who take their vehicles to
a dealer for recall-related work rose from 777
in 2014 to 789 in 2015. Also, satisfaction is
eight points higher among customers with a
recall visit (789) than it is among customers
with a repair visit (781). In addition, the satisfaction gap between customers with recall
and nonrecall dealership visits shrunk from
27 points in 2014 to just 11 points in 2015,
according to the research.
The key is to temporarily redesign service department workflow so technicians can complete the
recall repairs quickly and efficiently. For example,
you could create a special &ldquo;recall lane,&rdquo; where all
of the necessary parts are lined up assembly-line
style and the paperwork is already pulled together.
Also, schedule recall work strategically. Don&rsquo;t
book your recall service schedule completely full.
Instead, allow some flexibility to accommodate
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4) 5 tips for boosting
sales employee retention
ecent years have seen improvements in
the U.S. employment picture. In fact, the
nation&rsquo;s unemployment rate has dropped
steadily since it hit double digits in the fall of 2009,
according to the Bureau of Labor Statistics.
R
With brighter job prospects, some dealership
employees are looking to see whether the grass
might be greener somewhere else. So this might
be an ideal time to focus on efforts to boost
employee retention at your dealership. Retaining
sales staff is especially critical because salesperson
turnover tends to be high in the industry &mdash; 72%
annually, according to a 2015 workforce study by
the National Automobile Dealers Association.
Here are five strategies that can help you hold
onto your salespeople:
1. Create a healthy work environment. Your
employees should feel comfortable being themselves in your dealership. And all employees
should be treated equally and given the same
opportunities to succeed.
It&rsquo;s OK to foster some friendly competition among
your salespeople. Just make sure it doesn&rsquo;t cross
the line into unhealthy competition, like salespeople nabbing each other&rsquo;s customers or trying
to undermine each other&rsquo;s sales. In these scenarios, jealousy and bitterness could arise between
salespeople that can taint the work environment
for everyone.
Many employees today,
especially young Millennials,
consider work-life balance
to be the most important
aspect of their job.
2. Strive for a healthy work-life balance. Many
employees today (especially young Millennials)
consider work-life balance to be the most important aspect of their job &mdash; even more so than
compensation. So try to create a work
schedule that considers your staff
members&rsquo; lives outside of work as
much as possible.
Ask employees their preferred shifts
and accommodate their wishes whenever you can. For example, workers with
families might prefer a more traditional
Monday&ndash;Friday, 9-to-5 schedule, while
single employees might be more open
to working evenings and weekend days.
3. Take a fresh look at your sales
compensation plan. Re-examine
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5) your comp plan periodically to see whether
it has kept pace with the marketplace and
your competition. Also make sure that sales
goals and incentives are realistic, given current
market conditions.
But don&rsquo;t stop there. In addition, provide ongoing training via seminars, workshops and informal
&ldquo;lunch &rsquo;n learns&rdquo; to help your salespeople keep
their selling skills sharp.
You can obtain competitive compensation data
from a dealership &ldquo;20 Group&rdquo; or your state or
local dealer association. If your competitors are
offering more than you are, you may need to
bump up your compensation to keep salespeople
from jumping ship.
5. Offer regular feedback. It&rsquo;s human nature for
employees to want to know how they&rsquo;re doing,
and your salespeople are no different. Many
dealerships conduct annual performance reviews,
but you should offer informal feedback on your
salespeople&rsquo;s performance more frequently than
this if you&rsquo;re not already doing so.
4. Provide training and development opportunities. Determine which skills are the most critical
to your salespeople&rsquo;s success and then create a
training program designed to teach them these
skills. Training should start on the first day of work
for new hires and continue until they&rsquo;re comfortable with your dealership&rsquo;s sales process.
Regular feedback is especially important for new
salespeople who might be a little unsure of themselves. Plan to sit down with new sales personnel
after their first 30 and 60 days on the job to share
your observations about what they&rsquo;re doing well
and offer coaching to help them improve in areas
where they&rsquo;re weak. â°
Lift your profitability to new
heights with smart management
oney in, money out. Even when cars
and trucks seem to be leaving your
store in droves, expenses continue to
climb and climb &mdash; and it may be hard to stay as
far above the breakeven point as you desire.
discount, or even a free first oil change, to introduce
them to your service department. Hopefully, they&rsquo;ll
return for future work. Also, consider expanding or
rearranging your service hours to accommodate
customers with nine-to-five jobs.
But don&rsquo;t be discouraged. There are a number
of things your dealership can do to boost profitability. And they start with smart management.
Strategizing your F&amp;I efforts
M
Winning over service customers
If yours is like most dealerships, much of your
overall profit is derived from servicing the vehicles
you sell, not from the vehicle sales themselves. So
consider offering customers some kind of service
Finance and insurance (F&amp;I) is a potential source
of added profit for dealerships that sell vehicle
financing, extended warranties, service contracts,
gap insurance coverage and related products.
Approach F&amp;I sales strategically by identifying both
the highest margin F&amp;I products and the ones that
will provide the most benefit for your customers.
Then set goals and pursue them vigorously.
5

6) Joining a dealership &ldquo;20 Group&rdquo;
Dealership &ldquo;20 Groups&rdquo; consist of similar but
noncompeting dealerships that share best practices and strategies among themselves to help
improve dealership management and boost
profitability. You also can view standard financial
ratios (including gross and net profit margins)
among dealerships similar to yours so you can
benchmark your numbers against them.
Revisiting sales compensation
When they walk in your door, many buyers today
are more informed about vehicles than ever before.
They often already know which vehicle and features
they want and how much they&rsquo;re willing to pay. In
this scenario, a fully commissioned salesperson
might not be needed. You might be able to reduce
your sales compensation for some positions, which
will increase your bottom-line profitability.
Reviewing your DMS program
In the past, only a few dealership management
software (DMS) providers captured the automotive
market. But with the advancements in software
development, a significant number of new players have entered the playing field, allowing for
greater competition and reduced pricing. A less
expensive DMS provider may be able to meet
your needs and save your dealership significant
dollars, so it could pay to shop around.
You also might be able to trim back on some
of the &ldquo;bells and whistles&rdquo; that your dealership
really doesn&rsquo;t need. Negotiating a better package
might then become even more feasible.
Improving inventory management
The faster your inventory turns, the higher your
profits will generally be &mdash; and the better your
cash flow. But there&rsquo;s both an art and a science
to finding the right balance of vehicle inventory
for your dealership. Carry too many vehicles and
you&rsquo;ll pay excess carrying costs that cut into your
profit; carry too little and you might be unable to
meet customer demand.
Carefully track inventory turnover and decide what
to do with vehicles still on your lot after a certain
length of time: Lease them, wholesale them or
keep discounting them until they eventually sell.
Building lifetime customer relationships
View each sale not just as a one-time transaction,
but as the beginning of a lifetime relationship
with the customer. Most buyers will eventually
shop for another vehicle, and the second (and
third, and fourth) sale to a customer is usually
easier and more profitable than the first one.
A lesson to be learned
The lesson here is that you should be thinking
about profitability &mdash; and what you can do to
improve it &mdash; in all areas of your operation at
all times of the year. If you wait for year end
to review financial performance, your profit
picture will likely not make the grade. â°
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